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Activist investors are turning their attention to the U.S. banking industry, which many see as ripe for a new merger wave as lenders struggle to distinguish themselves amid intensifying competition.

Funds from veteran Jeffrey Ubben’s ValueAct to first-time agitators like Dallas-based Blue Lion Capital have been turning up the heat on banks over the past year, seeking everything from investments in digital banking platforms to outright sales.

Activist investors, who take big stakes in companies and pressure them to break up or shift strategy, often steer clear of heavily regulated banks. But with the Trump administration and a GOP-controlled Senate trying to ease some of the industry’s oversight, the possibility of big bank deals has resurfaced across Wall Street.

“We’ve been seeing activity and clients looking into the banks space for a number of years now,” said Schulte Roth & Zabel Shareholder Activism co-chair Ele Klein. “We’ve been waiting for more activism for a while now: There are too many banks in the U.S. right now and the industry needs consolidation.”

The logjam broke Thursday, when BB&T and SunTrust announced their $28 billion all-stock merger, the first big bank deal in a decade. The combination will create the sixth-largest lender in the United States with around $443 billion of assets.

The deal is expected to result in annual cost savings of around $1.6 billion by 2022, the companies said.

“The competition is for our clients and making sure that we’re relevant,” SunTrust CEO William Rogers said. “The good news is we come in with really good strength. We had great performance on our digital platforms, we’ve been making investments to date. So what we get to do is double down on that, so we view the competitive environment as anyone who’s trying to acquire clients.”

Activists may be inspired to push other banks. Already ValueAct has amassed a stake in Citigroup, saying last year that banks are lower risk “than at any time in our investing lifetimes.”

Though ValueAct hasn’t made public calls for changes to Citi’s board or management, the bank has agreed to give the activist investor greater insight into its strategy and operations. The company said last month it entered into an information-sharing deal with ValueAct, giving Ubben’s fund access to confidential data.

Many are looking to see combinations of other large regional banks including Citizens Financial Group, KeyCorp and PNC Financial, said Blue Lion partner Johnny Guerry, who joined the firm earlier this year to assist in its activist practice. While shares of these banks are up so far this year, each are down more than 18 percent over the past 12 months and are trading around a price-to-book value around 1, typically a sign of an undervalued stock.

“A vibrant M&A market leaves underperforming banks with few excuses to not explore strategic alternatives,” Guerry told CNBC on Thursday. “Comerica has been pressured by activists over the past few years, and the success of these transactions only augments the legitimacy of the activists’ calls to find a partner.”

Blue Lion, though small compared with the likes of ValueAct, tried its luck in bank activism in 2018. The first-time activist tried to initiate a proxy fight at HomeStreet, a small regional bank with business in Washington, Oregon, California and Hawaii.

The fund botched its filing, according to regulators, and had to resort to pleading with fellow shareholders to register protest votes against the bank’s incumbent directors. The fund did not comment on its future plans at HomeStreet.

Last week, Blue Lion initiated another battle, sending a letter to Empire Bancorp urging a sale, citing poor efficiency ratios and “egregious expense levels.”

Jim Chadwick, a partner at Ancora Advisors, is another manager who is unafraid of turning active on banks.

“I think we could see an uptick in activism for the rest of 2019 as a result of the correction in valuations and I think many investors know this is probably close to the ninth inning of the economic recovery,” Chadwick wrote in an email. He added that banks considering a deal should act before M&A funding dries up.

“A lot of bank activists say a bank has to earn the right to its independence, which means the bank has to perform and execute at least on par with peers, or better,” Chadwick added.

Even without activists, big banks are under pressure to improve results. Goldman is parsing through its operations to deliver another $5 billion in annual revenue by next year. J.P. Morgan and Bank of America are expanding their branch networks to new geographies and Wells Fargo is cutting costs.

Consolidation has historically helped banks improve their valuations and boost efficiency because cost cutting is often a result, RBC bank analyst Gerard Cassidy told CNBC.

“I would say when you look at the 1990s into the 2000s and you look at profitability and efficiency, it increased meaningfully and coincided with the great level of consolidation in years,” Cassidy said Thursday. “It will make it more efficient and profitable, expense saving will fall to the bottom line.”

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